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Replacing bank accounts

This article details the steps that should be taken when a school district is closing a bank account and replacing it with a new bank account. These steps should be followed in order:

  1. Create new function/object
  2. Create new accounts
  3. Create new financial institution accounts
  4. Update default accounts
  5. Create transactions
  6. Continued use and bank reconciliation

1. Create new function/object

Every bank account needs to be associated with a unique asset function (IL) or object (MO).

In Illinois, the typical function used for operating accounts is 112. You may want to create a new function such as 1121 nested underneath 112. 

To create a new function:

  1. Go to Financials Main > Setup > Functions
  2. Expand function 100, then function 110, using the arrows on the left
  3. Next to function 112, click Create Function
  4. Code: 112
  5. Local Code: 1
    1. If you cannot enter a local code, contact financials@common-goal.com to request a change to your district’s dimension configuration.
  6. Enter an appropriate Description
  7. Save

In Missouri, the typical object used for operating accounts is 1111. You may want to create a new object such as 1112 nested underneath 1110.

To create a new object:

  1. Go to Financials Main > Setup > Objects
  2. Expand object 1100
  3. Next to object 1110, click Create Object
  4. Code: 1112
  5. Enter an appropriate Description
  6. Save

2. Create new accounts

You will need new accounts in your Chart of Accounts to go along with the new function or object. You should create a new account for every fund 

To add new accounts to the Chart of Accounts:

  1. Go to Financials Main > Setup > Chart of Accounts
  2. Create
  3. Enter a description
  4. Pick the appropriate dimensions
  5. Save
  6. Repeat for every fund that may be used with the new account

3. Create new financial institution accounts

Every bank account needs to be created as a financial institution account in order to reconcile the bank statements later.

To create a new financial institution account:

  1. Go to Financials Main > Setup > Financial Institution Accounts
  2. Create
  3. Enter details (for more information, see Financial Institution Accounts)
  4. Save

You may optionally want to update the name of the old account to add something like “DO NOT USE” or “FORMER” in the description, as a reminder to not accidentally select it in the future.

4. Update default accounts

Replace the default financial institution accounts at your district with the new one so that you don’t accidentally continue to post transactions to the former account.

Note: If you are replacing something that is NOT your main operating account (e.g. imprest account), you may skip this step.

To update the default Accounts Receivable account:

  1. Go to Financials Main > Accounts Receivable > Options
  2. Edit
  3. Change the Default Deposit Bank Account
  4. Save

To update the default Payroll account:

  1. Go to Financials Main > Payroll > Payroll Options
  2. Edit
  3. Change the default Financial Institution Account
  4. Save

Accounts Payable more typically uses various bank accounts (operating, imprest, activity, etc.), so there is no default account to update.

5. Create transactions

Lastly, create the transactions that are needed to close out the old account and open the new account. Often, this is done by a transfer.

To record the transfer:

  1. Go to Financials Main > General Ledger > General Journal > Create Transfer
  2. Fill out the details as needed. In particular:
  3. In the Amount section, you will need to add a line for each fund. Make sure you look up the amount associated with each function 
  4. In the Withdraw Funds From field, pick the old account
  5. In the Deposit Funds To field, pick the new account
  6. Save

For more details, see Bank Transfers.

6. Continued use and bank reconciliation

At this point, you can use the new financial institution accounts on all future transactions.

If there are any outstanding checks that initially credited the old asset account but end up coming out of the new account (which may happen if the bank account is opened at the same bank), you’ll need to create journal entries/transfers to debit the old asset account and credit the new asset account instead.

When it comes time to reconcile your bank statements, you will end up with a month that has statements for both the old account and the new account.

  • The final bank statement on the old account should have an ending balance of $0.00, and the transfer will show up in the Checks/Other Debits tab.
  • The first bank statement on the new account should have a starting balance of $0.00, and the transfer will show up in the Deposits tab.